Jan. 22 (Bloomberg) -- Dish Network Corp. is in position to
be the most aggressive bidder in the first major U.S. airwaves
auction in more than five years, which started today. The
question is what the satellite-television operator will do with
the bargain-priced frequencies if it wins.

Dish may use the frequencies to challenge leading mobile
service providers Verizon Wireless and AT&T Inc., or it may act
as a conduit and lease the airwaves so companies like Google
Inc. and Amazon.com Inc. can provide mobile broadband service.

Chairman Charlie Ergen promised federal regulators that
Dish will bid at least $1.56 billion in the nationwide sale of
airwaves known as the H Block. The field is open for Ergen
because the third-largest U.S. wireless carrier, Sprint Corp.,
isn’t taking part after pushing for the auction, leaving a field
of 23 bidders without the top U.S. mobile providers.

“Dish faces little competition for the H Block and should
be able to buy another block of national spectrum at below-market prices,” Walt Piecyk, an analyst with BTIG LLC in New
York, said in an interview.

The U.S. Federal Communications Commission is conducting
the auction over the Internet during an undetermined number of
days, with no winners announced until all bidding has finished.
The FCC split the U.S. into 176 areas, and auction participants
bid anonymously in successive rounds for airwaves in each region
until no more bids are received.

More Bidding

Participants today offered $221.3 million for licenses in
78 areas, with more bidding set for tomorrow, the agency said in
a Web posting.

A larger auction in 2008 attracted more than 200 qualified
bidders and lasted 38 days with bids totaling $19.6 billion.
Verizon Wireless and AT&T were the top winners.

With other major prospective buyers sitting out this round,
Dish’s strategy in the new FCC auction is a topic of speculation
among analysts and consultants.

“Does Charlie end up buying every license in the auction?
Or does he buy 95 percent of them and everybody else buys one or
two?” Coleman Bazelon, a Washington-based principal for the
Brattle Group, said in an interview.

Bob Toevs, a Dish spokesman, declined to comment on the
company’s plans, citing rules that aim to prevent collusion on
bids and bar public discussion of auction strategy.

Winning may put Ergen in a position to lease airwaves to
Internet or cable companies, Piecyk said. Or the sale may allow
Dish to enter the North American mobile-services market, which
produced $224 billion in 2012 revenue, according to data
compiled by Bloomberg Industries.

Ntelos, Gabelli

Dish is seen adding to spectrum holdings that includes
swaths purchased in 2012 from bankrupt satellite providers, as
“a minimal critical mass of spectrum is necessary for a new
competitor to enter the wireless market,” Piecyk said.

Potential competitors in the bidding include Ntelos
Holdings Corp., a regional wireless provider based in
Waynesboro, Virginia. Craig Highland, senior vice president at
Ntelos, declined to comment.

Also registered to bid is Lynch 3G Communications Corp., a
company controlled by Mario Gabelli, chief executive officer of
Gamco Investors Inc., who in 2006 paid $130 million to settle
U.S. charges that he used sham companies in earlier auctions.
Gabelli didn’t admit wrongdoing.

Robert Dolan, president of Lynch, declined to comment.

Emergency Network

The auctions help fulfill a priority of the administration
of President Barack Obama, who has pledged to almost double the
airwaves available for mobile Internet service by reallocating
500 megahertz of government and commercial spectrum. The H Block
auction adds 10 megahertz; later auctions will yield more
capacity.

Congress said the first $7 billion from the auctions will
go to fund a nationwide network for emergency workers, helping
to fulfill a gap in radio capabilities identified by the 9-11
Commission, which said communications difficulties contributed
to deaths during the terrorist attacks of Sept. 11, 2001.

Funds from the H Block auction will go the new network.

“It’s the first chance for the FCC to raise money via
spectrum sales for the new wireless public safety network, so
the FCC really wants this auction to go well,” Paul Gallant,
Washington-based managing director for Guggenheim Securities,
said in an interview.

Sale results won’t say much about the amount of money that
later auctions will yield, Bazelon said.

“It’s not really a market transaction,” Bazelon said. The
$1.56 billion is “a minimum value” Ergen placed on the
spectrum as part of a deal with the FCC, Bazelon said.

Dish’s Deal

Under the agreement struck with the agency last year when
Commissioner Mignon Clyburn, a Democrat, was interim chairwoman,
Ergen can choose whether to switch airwaves he already owns from
sending information to receiving data. The switch would
transform the airwaves from carrying light traffic to handling
heavy data flows for video and other applications.

Clyburn pushed to begin the auction this month rather than
delay it to coincide with the other sales, a tactic that fellow
Democratic Commissioner Jessica Rosenworcel said could bring
more bids and raise more money.

“To say that a spectrum auction is long overdue is an
understatement,” Clyburn said in an e-mail. “This will be the
FCC’s first major auction since 2008, and it comes at a time
when the commercial market and consumer demand for spectrum has
skyrocketed.”

By holding the auction starting today, the FCC “is
expediting commercial use of spectrum so it can be deployed as
rapidly as possible,” Clyburn said.